New York Now Accepting Applications for Digital Currency Exchanges

New York’s Superintendent of Financial Services, Benjamin M. Lawsky, has issued a public order that confirms the state is now accepting applications for digital currency exchanges.

Perhaps most notably, however, was that Lawsky indicated that these businesses will be regulated under new New York regulation, which he committed to having in place by the end of the second quarter of 2014.

In his remarks, Lawsky struck his usual balance of at once recognizing the promise of digital currencies and stressing that related business activities need to be conducted in a responsible and lawful manner.

“The recent problems at Mt. Gox and other firms further demonstrate the urgent need for stronger oversight of virtual currency exchanges, including robust standards for consumer protection, cyber security, and anti-money laundering compliance.

Proposal guidelines

Lawsky also disclosed new information for those seeking to apply for a New York-based exchange, indicating that interested firms can now immediately submit proposals and applications. However, he noted that such submissions represent a formal commitment to the regulatory process.

Further, Lawsky suggested that New York will not be bound by commitments that prevent it from taking what he considered appropriate action to safeguard consumers during this process. Lawsky noted that its policies for digital currency exchanges could be later modified to enhance consumer protection, cybersecurity or anti-money laundering initiatives.

Said Lawsky:

“Turning a blind eye and failing to put in place guardrails for virtual currency firms while consumers use that product is simply not a tenable strategy for regulators.”

A long-awaited move

The move puts in motion an idea that first arose during the NYDFS bitcoin hearings in January. There, major digital currency investors made the case that New York should consider hosting such businesses, both for the job creation benefits and because the industry was in need of more oversight, though this suggestion has not been without criticism.

Major bitcoin business leaders had since hinted at dialogues with state regulators on the matter.

But look at this - divergence ????

US Securities Regulator FINRA Warns of Bitcoin’s Investment Risks

The Financial Industry Regulatory Authority (FINRA), the largest independent regulator in the US, issued an investor alert about bitcoin on 11th March, calling the digital currency “more than a bit risky” as part of a new warning to consumers and investors.

FINRA said the alert aims to raise awareness about the downsides of bitcoin investments in light of the recent high-profile struggles of bitcoin business.

Read the release:

“FINRA is issuing this alert to caution investors that buying and using digital currency such as bitcoin carry risks. Speculative trading in bitcoins carries significant risk. There is also the risk of fraud related to companies claiming to offer bitcoin payment platforms and other bitcoin-related products and services.”

Hacking, volatility top FINRA’s listed risks

FINRA detailed what it referred to as the “numerous risks” associated with buying, selling and using bitcoin, including that bitcoin is not legal tender in the US.

The agency further emphasized how bitcoin is susceptible to fraud, saying:

“Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers can – and have – lost money.”

Additional comments covered how bitcoin exchanges are volatile and could close at any time, and that bitcoin transactions, by nature of their design, are not reversible like other popular forms of payment.

FINRA solicits tips and information

The announcements follows other notable statements from US policymakers, who have been increasingly outspoken about digital currencies, including US Senator Joe Manchin, top Alabama securities regulator Joe Borg and Federal Reserve Chairwoman Janet Yellen, as well as their intent to follow their progress.

FINRA, likewise, suggested it will be monitoring events in the digital currency space.

The regulatory body ended the release by encouraging those who have been defrauded by a securities professional or firm to file a complaint with its representatives or to contact its support lines with tips and information.

ad....

French Finance Minister Calls for EU Action on Bitcoin Regulation

France’s Minister of Economy and Finance, Pierre Moscovici, issued a call on 4th March for European regulators to collaborate on digital currency regulation as part of an effort to ease the concerns of financial institutions and policymakers.

In statements to the press, Moscovici has indicated he intends to request that EU member states discuss the matter at the EU Economic and Financial Affairs Council (ECOFIN), the organisation that sets the EU budget and monitors the financial markets in member states.

Said Moscovici:

“This is an imperative topic to be treated not only at national level but also at European level.”

Moscovici also revealed that his own government agency has been studying the issue for a year through the efforts of an inter-ministerial working group.

The working group is set to disclose its findings in April 2014 in a report that will add to France’s contributions to ECOFIN’s broader research efforts.

Regulation in France

France has been one of the more active EU nations on matters relating to digital currencies so far in 2014, issuing guidance that bitcoin exchanges need to register before operating domestically on 29th January, and holding Senate hearings on the topic on 15th January.

The 29th January ruling, however, did not regulate all bitcoin activities in France. Delphine Amarzit, a representative of the French Treasury has suggested that digital currency transactions that don’t involve fiat money may also need to be examined due to this limitation.

The Bank of France previously ruled that bitcoin is “neither legal tender nor a means of payment”, a ruling that is contributing to uncertainty on how regulation in France can go further in regulating the currency. The only “legal” currency in France is the euro.

Global impact

The news that the EU may soon issue more guidance is particularly significant given the number of nations that have expressed that they are looking to it for leadership.

For example, the Central Bank of Lithuania told CoinDesk in February it would look to the EU for regulatory guidance, while Greece and Hungary have used past statements by the European Banking Authority to inform its citizens about the risks associated with digital currencies.

As such, any determinations made by ECOFIN as part of the research are likely to have a far-reaching impact on the global community as it seeks to better understand how to put controls on the digital currency.

While the volatility of bitcoin has been a concern, recent events (such as the collapse of Mt. Gox) saw more moderate price movements than might have been expected – a sign, many hoped, of the digital currency’s resilience and growing maturity.

For whatever reason, Roubini does seem to have a bee in his bonnet over bitcoin, and even its advocates are not immune from his attack:

A further Roubini tweet stated: “Bitcoin isn’t a store of value as little wealth is in Bitcoin and no assets in it. Also given price volatility it is a lousy store of value.”

Reddit user Beyond_any_therapy replied:

“That’s so funny, because many online retailers accept BTC as payment. It has value to them. So, you’re saying little wealth is in Bitcoin. Last time I checked it was a billion dollar industry.”

Early days

This is not the first time Roubini has criticised bitcoin.

In January, he called it a potential bubble caused by Federal Reserve money printing.

Bitcoin has many notable advocates in the public eye, including Richard Branson, CNBC’s Jim Cramer, and Al Gore, and one US congressman even launched a satirical bid to ban the dollar in response to a senator’s attack on the cryptocurrency.

The fact remains, though, that some mainstream economists have been reluctant to support bitcoin.

Bearing in mind that the currency is in its early years as a financial instrument, criticisms of the digital currency may be 10 years too soon. Perhaps the final word is best left to the famous economist Milton Friedman:

“The one thing that’s missing, but that will soon be developed, is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B, without A knowing B or B knowing A.”

Philippines Regulator Issues Warning on Digital Currencies

Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has issued a warning on bitcoin which echoes similar statements issued by regulators worldwide over the past few months.

BSP acknowledged that digital currencies like bitcoin are “now being exchanged in the Philippines” but stressed that they remain a relatively risky investment.

Additionally, it warned that digital currencies and digital currency exchanges are not regulated by national regulators and thus consumers would not be protected from losses if an entity holding digital currencies went under.

No shortage of concerns

BSP pointed out that there is no assurance that any digital currency would be stable or exchangeable. The value can be highly volatile and digital currencies can be used for illicit purposes, it stated.

In terms of consumer advice, the bank outlines “things to think about before buying, holding or trading”, including: loss of value, theft, lack of consumer protection and the possibility of having assets frozen. The bank stresses thatexchange platforms are unregulated and that there is no protection for investors in case of failure:

“At present, there have already been a number of cases where virtual currency exchange platforms have gone out of business or have failed.”

The risk of theft is real and digital wallets are not entirely safe, while at the same time consumers who purchase goods and services for bitcoin cannot rely on consumer protection regulation in case something goes wrong. Volatility is another concern, as is the fact that nobody can guarantee exchange, it stated.

Lastly the misuse of digital currencies can lead to criminal investigations and asset freezes – even investors who acted in good faith can have their assets frozen as part on a wider investigation (ie in case authorities opt to close an exchange platform).

No immediate effect

Like other regulatory warnings on digital currencies, the BSP statement is unlikely to have much of an effect on the country’s bitcoin user base. Although the Philippines isn’t bitcoin’s biggest community, the country remains a very interesting market for a number of reasons, mainly remittances.

Back in January a team of bitcoin enthusiasts launched BuyBitcoin.ph, an exchange geared toward remittances. With good reason – there are an estimated 2.2 million Filipino expats in Asia and the rest of the world, and their contribution to the local economy is huge.

In 2013 alone they wired more than $13.9bn to the island nation. To put this in perspective, the country’s GDP is around $250bn. Eliminating transfer fees in the remittance process could be a boon for many expats and their families back home.

MT GOX Items.........

Isn't It Ironic: Mt.Gox Hacker Demands Ransom From Exchange Users To Not Reveal Their Personal Data

The bankruptcy of the once largest Bitcoin exchange may be history, but now the real drama begins.

First, over the weekend, allegations surfaced that not the whole truth may have been revealed during the heartfelt announcement by Mt. Gox CEO, Mark Karpeles, who claimed that $400 million in Bitcoin were stolen by hackers. As Forbes reported, hackers took over the Reddit account and personal blog of Mark Karpeles, to reveal that the exchange he ran had actually kept at least some of the bitcoins that the company had said were stolen from users.

"It’s time that MTGOX got the bitcoin communities wrath instead of [the] Bitcoin Community getting Goxed,” wrote the unidentified hackers, referring to the multiple occasions over its three year history when Mt. Gox has gone offline, delayed trades or suspended withdrawals, events so common that Bitcoin users coined the phrase to be “goxed”–to suffer from Mt. Gox’s technical glitches.

In addition to merely allege, however, the hackers provided proof:

The hackers also posted a 716 megabyte file to Karpeles’ personal website that they said comprised stolen data from Mt. Gox’s servers. It appears to include an Excel spreadsheet of over a million trades, a file that purports to show the company’s balances in eighteen difference currencies, the backoffice application for some sort of administrative access to the databases of Mt. Gox’s parent company Tibanne Limited, a screenshot of the hackers’ access to those databases, a list of Mark Karpeles’ home addresses and Karpeles’ personal CV.

In the hackers’ summary of Mt. Gox’s balances in various currencies, they point to a claimed balance of 951,116 bitcoins, which they take as evidence that Mark Karpeles’ claim to have lost users’ digital currency to hackers is fraudulent. “That fat fuck has been lying!!” a note in the file reads.

It remains unclear at this early stage in the MtGox bankruptcy if indeed Karpeles ended up Madoffing some or all of the Bitcoin entrusted to him: Forbes notes that "the Bitcoin community has been puzzled by the apparent lack of movement of Mt. Gox’s bitcoins since the company declared bankruptcy last month. Despite stating that it lost 850,000 bitcoins in total in its bankruptcy filing, Bitcoin experts haven’t seen the movement of those coins in the Bitcoin blockchain, the public ledger of transactions that prevents fraud and forgery in the Bitcoin economy."

But second, and far more important, "a user on the BitcoinTalk forum posted a message–since deleted by the forum’s moderators–claiming to be offering for sale a 20 gigabyte stolen database from Mt. Gox, including the personal details of all its users and even scans of their passports. “This document will never be elsewhere published by us,” wrote the user, who went by the name nanashi____. “Selling it one or two times to make up personal loses from gox closure.” The hacker asked for a price of 100 bitcoins for the database, about $63,600 at current exchange rates."

An updated announcement by user "nanashi" can be found in the following pastebin, in which he explains just how much it will cost naive Bitcoin traders to retain their anonymity. The price to put this entire gruesome episide behind them: 0.25 bitcoin, or a little over $150.

Most around here know we are selling gox customer info. Many have contact us requesting to pay to have their data removed before we sell. We are doing this for a cost of 0.25 BTC per person removed. We have already sold and release 20% of data to 2 buyers, so if you are a part of that it's too late for you.

We are release the rest of this data to our buyers sometime this week, so after that happens it is too late for everyone who has not been removed already.

2) I will check file already sold, if you are not part of that I will send you unique bitcoin address. If you don't get response it means your data has already been sold in first batch or we have finalized sale of all data.

3) After you have sent .25 bitcoin payment, email us again to inform us of this.

4) Thats all, we will delete your personal data and passport scan from all copies of database.

DO NOT email asking to do this for cheaper unless you are doing 10+ accounts at once. Also do not email us asking to confirm what information we have about you. If gox had it, we have it, and as you can read on boards we have confirmed possession of this dump for many people. We let you use our same email for this as all other gox hack communication so you know we are same people. Doing this things will cause us to ignore all further message from you.

nanashi

And to think - the whole point of Bitcoin once upon a time (long, long ago) was to preserve the anonymity of the users... Oh, and the "money" was safe and unhackable...

Mt. Gox Inc., the American affiliate of the bankrupt Bitcoin exchange that lost track of hundreds of millions of dollars’ worth of virtual currency, had its U.S. assets frozen by a federal judge in Chicago.

U.S. District Judge Gary Feinerman today issued a temporary order tying up money and property belonging to the affiliate, its ultimate corporate parent, Tibanne KK, and principal Mark Karpeles after a hearing today.

He issued that order without opposition from the frozen entities, who weren’t represented in court, and in the presence of lawyers for the parent, Tokyo-based Mt. Gox Co., which filed for bankruptcy in Japan last month. Feinerman’s order doesn’t cover the bankrupt entity and expires on March 25.

Once the world’s biggest Bitcoin exchange, Mt. Gox Co. said in a U.S. court filing that almost 750,000 customer Bitcoins and 100,000 of its own, about 7 percent of all Bitcoins in existence worldwide, were missing and probably stolen.

Almost at the same time it was filing for bankruptcy in Tokyo last month, the company, its affiliates and Karpeles were being sued in the U.S. by Gregory Greene of Skokie, Illinois, a depositor claiming he had lost access to about $25,000 worth of currency.

Suing on behalf of the businesses’ U.S. customers, he accused the companies and Karpeles of misappropriation and fraud.

Dallas Filing

Mt. Gox Co. has also sought protection from creditors in the U.S., and yesterday obtained an order from U.S. Bankruptcy Judge Harlin Hale in Dallas shielding it from litigation.

Hale declined to extend that protection to the other defendants sued by Greene, which Feinerman took into account today when he approved the asset freeze. Citing what he called a “very limited record,” Feinerman said Greene established a “sufficient likelihood of success” on his claims to warrant the freeze.

“It may turn out there are no such assets,” Feinerman said. The judge also said his findings in support of the injunction could change as the case before him goes forward.

John Murphy, an attorney for Mt. Gox Co. who was present at the Chicago hearing, declined to comment afterward.

Government Order

One of Greene’s attorneys, Steven Woodrow, told the judge he thought the U.S. government had obtained a court order tying up between $2.1 million and $5 million in assets controlled by Karpeles in the U.S.

After the hearing, lead plaintiff’s lawyer Jay Edelson said he plans to immediately question Karpeles under oath.

“We can finally get some real answers,” Edelson said.

Feinerman set a status conference for March 20. Hale scheduled an April 1 hearing in Dallas to determine whether Mt. Gox Co. can maintain its protections in the U.S. for the duration of its Japanese bankruptcy proceedings.

The case is Greene v. Mt. Gox Inc., 14-cv-01437, U.S. District Court, Northern District of Illinois (Chicago). The U.S. bankruptcy is In re MtGox Co., 14-bk-31229, U.S. Bankruptcy Court, Northern District of Texas (Dallas).

A US bankruptcy judge in Dallas, Texas, granted Mt. Gox’s request forChapter 15 bankruptcy protection on 10th March, a move that will partly shield the troubled Japan-based bitcoin exchange’s assets from creditors and block at least two lawsuits against the business.

While this may seem like a setback for those hoping to recoup lost funds from the exchange, Edelson law firm partnerChris Dore has suggested that the ruling only protects Mt. Gox KK, its Japan-based entity, from further action, not all of its associated legal entities.

Baker & McKenzie, the law firm representing Mt. Gox in the US, did not offer comment on the developments.

Mt. Gox mounts a defense

In sworn statements at the courthouse on Monday, Karpeles maintained that issues with the Bitcoin protocol contributed to the demise of his company. The comment is similar to past claims made by the CEO, ones which were roundly denounced by notable members of the bitcoin community.

Said Karpeles:

“The facts known to date indicate that it was caused or related to a flaw in the software algorithm that underlies Bitcoin, and ‘hacking’ attacks of one or more persons.”

The statement suggests that bitcoin’s transaction malleability could be a continued line of defense for Mt. Gox as it looks to ward off criminal accusations.

Federal probe

Bloomberg reports that Manhattan US Attorney Preet Bharara and the Federal Bureau of Investigation are allegedly currently investigating whether Mt. Gox and its associated legal entities may have committed any wrongdoing during the shutdown of the company.

The media outlet indicated that a representative for Bharara would not comment on the investigation.

A temporary restraining order hearing against Tibanne, Mt. Gox Inc. and Karpeles will be held today, according to Dore.

The next hearing in the developing case is set to take place on 1st April, when Mt. Gox will seek to extend its protection until its bankruptcy in Japan is resolved.

MtGoxRecovery.com Seeks Reparation From Fallen Exchange

The backlash from Mt. Gox’s recent bankruptcy filings is now at full throttle, and a new website is building a case against the Japanese exchange with the goal of ultimately filing a lawsuit to recover damages.

The website suggests that Mt. Gox CEO Mark Karpeles’ “completely irresponsible actions” have left many of the exchange’s customers with considerable losses, and MtGoxRecovery.com hopes to recover these funds with the help of a Japanese law firm.

Widespread losses

In addition to the 850,000 bitcoins that have gone missing from Mt. Gox, Karpeles revealed the company has more than $60m in outstanding debt owed to creditors and customers.

At one time the industry’s most popular exchange, Mt. Gox undoubtedly held a considerable number of bitcoins, and when the exchange halted withdrawals back in February, many worried that their funds would be forever tied up on Mt. Gox.

Message boards across the Internet have served as unofficial support groups for victims of Mt. Gox’s apparent insolvency. On reddit, an entire subreddit (r/mtgoxinsolvency) dedicated to following the downfall of Mt. Gox has garnered over 200 subscribers, many of whom have reported significant bitcoin losses on the exchange.

One thread dedicated to sharing “horror stories” from Mt. Gox’s bankruptcy was filled with anecdotes of loss:

Seeking justice

MtGoxRecovery.com was created by tech entrepreneur and Bitcoin Foundationlifetime member Olivier Janssens, who claims to have personally lost more than $5m as a result of Mt. Gox’s questionable operations.

Janssens said he spoke directly with Karpeles in the months before Mt. Goxhalted transactions and filed for bankruptcy, and stated in no uncertain terms that he believes Karpeles has acted criminally:

“Mark knew I was a major stakeholder in the bitcoin community, and we discussed solutions for three hours to try to resolve this. At that time he kept telling me he could only send me a very limited amount per month, due to anti-money laundering issues. Obviously, this was a lie.”

One of the major concerns that Mt. Gox customers have consistently voiced is about the exchange’s lack of transparency in its operations, particularly in recent weeks when Mt. Gox halted transactions and eventually filed for bankruptcy.

Janssen pointed to the recent speculation surrounding the movement of $113m around the block chain and how many believe this money is linked with or even owned by Mt. Gox as evidence of Karpeles’ unethical obfuscation of information.

Speaking to CoinDesk, Janssen said:

“It’s very concerning to see assets moving [throughout the block chain] during civil rehabilitation. The legality of it is questionable to say the least, and it should not be done without clear communication to the creditors. Being completely transparent at this point is essential, and this is something that has been lacking at Mt. Gox since the beginning. People should not be given any false hope, nor should extra uncertainty be added.”

Building a case

Together with its lawyers in Japan, MtGoxRecovery.com claims it will file a lawsuit that will “try to recover as much as possible, and additionally press criminal charges against Mark Karpeles personally.”

Janssen says that the website has gathered a substantial amount of information from users that have signed up as plaintiffs in the lawsuit, and in cases where the information is critically important, they plan to pass their case along to the police as well.

One area of focus for MtGoxRecovery.com and its users is Japanese bankruptcy law. Janssens plans to offer a public information session on the subject this week for users who have signed up on the website.

The time and date of this session is yet to be announced, but considering the large number of people who have lost bitcoin on Mt. Gox, the demand for more information is clearly substantial.

Mt. Gox Files for Chapter 15 US Bankruptcy Protection

Troubled Japan-based bitcoin exchange Mt. Gox has filed for Chapter 15 bankruptcy protection, an ancillary form of bankruptcy that will complement its primary Tokyo District Court claim issued on 28th February.

US Chapter 15 bankruptcy provides specific protections in cases of cross-border insolvency, and is based on UN model law. Both Japan and the US have adopted Chapter 15 bankruptcy in an effort to better protect the interests of shareholders and maximize the value of debtor assets in cross-border bankruptcies.

At the time of its filing, Mt. Gox claimed an outstanding debt of ¥6.5bn ($63.6m), and indicated that 850,000 bitcoins had been lost or stolen from its exchange.

This is just the latest development in the ongoing legal case against Mt. Gox. Shortly after its original Japan filing, a US class action suit was mounted by Colorado-based Edelson law firm, which specializes in technology cases. The lawsuit is seeking damages, alleging that Mt. Gox was negligent for failing to provide adequate security to its customers.

Edelson did not respond to comments requesting more information on how this filing could affect its case.

What is Chapter 15 bankruptcy?

Upon qualifying for Chapter 15 protection in the US, certain relief could become available to Mt. Gox, including the granting of an “automatic stay” that would prevent creditors from seizing its US assets, though Mt. Gox would have to request such an arrangement in writing. The presiding bankruptcy judge would have the final say on granting the relief.

Next steps

Following the filing, a recognition hearing will typically be held within 30 days to determine whether the case is a “foreign main” or “foreign non-main” proceeding, distinctions that would affect the handling of the case. Mt. Gox may not necessarily have protection in the interim period before the hearing.

After the determination is made at the hearing, Mt. Gox would be able to carry out its main purpose in filing, which can include liquidating assets, approving its sale or assigning its leases in the US.

Mt. Gox indicated recently in a post on its website that it planned to restructure and restore the business in order to increase repayments to its creditors.

UPDATE (10th March, 8:35 GMT): There is good reason to believe that, while the data files may be genuine Mt. Gox data, .exe and Mac .app files within the dump are bitcoin wallet-stealing trojans. If you have somehow found a link to the files mentioned here, as we warned below, DO NOT OPEN THEM. If for some reason you have, transfer your bitcoins to another wallet immediately. _________________________________________________________________

Hackers (or disgruntled insiders) claim to have released a 700+MB file of Mt. Gox operational information and transaction data, including one sheet claiming the exchange could still have a balance of over 951,116 BTC.

One of the hackers managed to post the data on Gox CEO Mark Karpeles’ own blog, then announced the feat on Reddit. Karpeles’ site has since gone completely offline and Reddit moderators deleted the original post.

At press time the mods were engaged in a cat and mouse game with other community members who re-posted the original quote and several links claiming to be mirrors of the stolen data.

Revenge

In a profane rant, the original announcement said:

“It’s time that MTGOX got the bitcoin communities wrath instead of Bitcoin Community getting Goxed. This release would have been sooner, but in spirit of responsible disclosure and making sure all of ducks were in a row, it took a few days longer than would have liked to verify the data.” “Included in this download you will find relevant database dumps, csv exports, specialized tools, and some highlighted summaries compiled from data. Keeping in line with fucking Gox alone, no user database dumps have been included.”

“Repost and share this info before it’s gone. Lots of people, including us, lost money and coins.” Of primary interest to others was a file called ‘trades_summary’, which purported to show Mt. Gox’s balances in all available currencies.

This showed a balance of 951,116.21905382 bitcoins, with an accusation that Karpeles was lying about his company having no bitcoins to return to customers.

Many have pointed out that, even if the data is genuine, it could only represent the amount Mt. Gox believed it had in its reserves before shutting down, rather than an actual amount, and is not evidence of actual reserves.

Also included in the dump were a collection of .csv files detailing transactions and trades, Mark Karpeles’ own CV and a document containing two separate ‘home addresses’ of his in Tokyo.

The directories contained several executable files that readers would be well advised not to open on internet connected computers, no matter how many online commenters claimed their authenticity. Supposedly they are Mt. Gox’s own proprietary back office tools, though CoinDesk has not verified this and original files could have been altered before being posted on mirror sites.

Reddit users claim to have verified the data by examining spreadsheet material and looking up their own account balances.

Forbes reported that another post on the bitcointalk forums (also since deleted) claimed to have 20GB of stolen Gox data on a hard drive that they were willing to sell to cover their bitcoin losses. This supposedly included all user information, including photo ID scans from customer applications.

Forbes reports that the group gained access to the personal blog and Reddit account of Mark Karpeles, Mt. Gox's CEO. The hackers used the platforms to post a message that claimed Karpeles still had access to some of the bitcoins that he'd reported stolen. In support of the claim, they uploaded a series of files that included a spreadsheet of more than a million trades, Karpeles' home addresses, and a screenshot purportedly confirming the hackers' access to the data.

THE HACKERS CLAIM THAT MT. GOX STILL HAS ACCESS TO 951,116 BITCOINS

Also included as part of the 716MB file was a file that appears to show the exchange's balances in 18 currencies. The hackers point to this file — which reportedly shows a balance of 951,116 bitcoins — as evidence that Mt. Gox is misrepresenting the current situation. A note in the file from the hackers reportedly reads "That fat fuck has been lying!!"

THE FILES COULD SIMPLY SHOW POOR ACCOUNTING PRACTICES

Forbes says the veracity of the file has yet to be confirmed. It could simply highlight the kind of poor accounting practices that allowed hackers to steal the money in the first place, showing money in Mt. Gox's balances that has long since made its way to hacker hands; or it could be evidence to support the theory that the company used the cover of a transaction exploit to steal its customers' money. The exchange claimed it had lost 750,000 of its customers' bitcoins in its bankruptcy protection filing — in addition to 100,000 of its own bitcoins — but users of the cryptocurrency are yet to see that money appear on the log of public Bitcoin transactions known as the blockchain. That would suggest whoever does have the money isn't spending it at the moment.

Forbes suggests the hack may be related to another supposed breach in which a user on BitcoinTalk's forums offered a 20GB file that they said was also stolen from Mt. Gox. The user claims the file is full of Mt. Gox users' personal details and passport scans, and that they were planning to sell it for 100 bitcoins "one or two times to make up personal losses from Mt. Gox closure."

In bitcoin commerce news ......

South Korea Launches its First Two-Way Bitcoin ATM

South Korea is the latest country to introduce its first bitcoin ATM. Not only is the machine produced locally by a home-grown company, it is also two-way, meaning users can also sell bitcoins and withdraw cash.

The machine, which officially began operating yesterday, sits in the Coffee Sedona cafe in one of Seoul’s largest shopping malls, the Coex Mall which is also close to the Coex Intercontinental Hotel and a casino in the city’s world famous Gangnam district. For those wanting to buy bitcoins, it accepts cashand credit cards (note: the card slot on the machine is a dummy slot, normally used for non-bitcoin ATMs).

It is the result of a joint venture between bitcoin exchange Coinplug and Nautilus Hyosung, the number one ‘regular’ ATM manufacturer in Korea, which also has the world’s fourth-largest market share. Coinplug’s Richard Yun said the machine’s launch was well attended by the Korean media.

This video (in Korean) demonstrates how transactions are made in both directions using a smartphone wallet.

Security and compliance

The machine also has one other key feature, or lack thereof: unlike other two-way bitcoin ATMs, such as the one produced by US company Robocoin, the Coinplug machine does not collect any identification or biometric information from users. Robocoin, as what it calls a security feature, requires photo ID and takes a palm vein scan of users, although the company says this information is not uploaded to a database anywhere and that palm vein scans function like a secondary PIN, representing the “most anonymous biometric on the market”.

Coinplug’s machine does have some restrictions of its own, though. Yun said the machine is set to allow transactions at a maximum of (the equivalent of) $200 each, and a maximum of three transactions a day per wallet address. This is less than what is typically allowed by Korean banks for ATM transactions, which is $1,000 per transaction and $6,000 per day.

Other popular bitcoin ATM options, like the machines produced by Lamassu, accept cash and dispense bitcoins only.

Yun said the company was able to produce a two-way machine thanks mainly to the South Korean government’s light touch approach to bitcoin regulation so far. The government, like many others, has declared bitcoin is not a currency and will not regulate it, and has not made any attempts to restrict its use. Should the machine prove successful in its homeland, Coinplug will be looking for interested buyers outside Korea.

Coinplug has been busy in Korea this year, recently launching three separateAndroid bitcoin apps for merchants and traders, and a wallet app for everyday users. The company has also been funded so far 50% each in bitcoin and fiat currency by its Silicon Valley-based partner, new venture capital firm Silverblue.

I haven't been guest blogging here at Julia's AuctionBytes since I've caught the Bitcoin bug. However there are times that eBay and Bitcoin intersect. In fact, my first Bitcoin article, "How PayPal Almost Liberated Cyprus," was for AuctionBytes and discussed PayPal's early ambitions which mirror those of Bitcoin.

To be clear, there is no "Bitcoin Company." Bitcoin is open source and decentralized. It uses a system of distributed trust and a public ledger called the block chain that allow bitcoin to be exchanged directly from person to person (i.e. P2P / Peer to Peer) without the need to trust a third party.

On New Year's Eve I wrote an article for Bitcoin Magazine, "eBay Files Patent Application for Programmable Money" (a.k.a the "Gift Token Patent") that led to quite a few sensational headlines and misunderstanding of a concept called a "colored coin."

Why the speculation? Because Bitcoin is a threat to PayPal. I posted on Reddit under the user name Bidofthis a link to eBay's annual report "eBay 10K:eBay mentions Coinbase and Bitpay in annual report as competition (among others)", and quoted from the filing: "...PayPal also faces competition and potential competition from:...services such as Coinbase and Bitpay that help merchants accept and manage virtual currencies such as Bitcoin..."

Matthew Miller, a reporter for Bloomberg Television who has also been smitten by Bitcoin, recently interviewed John Donahoe where he abruptly advised the eBay CEO that Bitcoin will make the PayPal model obsolete and asked what is eBay going to do about it? Donahoe let the proverbial cat out of the bag (or did he?...): "...PayPal is building a digital wallet that can take multiple types of currency..."

As it happens, eBay did file a patent application mentioning Bitcoin (20130173416) with the United States Patent and Trademark Office. The application was published on U.S. Independence Day 2013 by USPTO and reveals that eBay is a Bitcoin pioneer: eBay actually filed the application back on December 29th, 2011, three years after Bitcoin's "genesis block" was released on January 3rd, 2009.

I almost called eBay an early adopter, but that phrase should really be reserved for the likes of BitMit.

BitMit was the first successful Bitcoin marketplace (well, second if we count Silk Road) and actually launched its service the same month and year of the eBay patent filing. and actually launched its service the same month and year of the eBay patent filing. BitMit closed its doors last November due to a security threat (a reported modest Bitcoin heist and potentially compromised database) about a week after my investigatory piece for Bitcoin Magazine Issue 14 "Bitmit Bitcoin Auction is With Bits but Without a Face" (print exclusive).

In eBay's Patent Application (20130173416) called a "System And Method For Managing Transactions In A Digital Marketplace," we can find the following extract:

"...{We have created a system for} digital currency processing. In example embodiments, the transaction request indicating an amount in a first currency and a desired second currency is received by the currency module. A non-exhaustive and example list of currencies capable of being exchanged may include frequent flyer miles, loyalty and reward points (e.g., credit card reward points, hotel loyalty points, retail loyalty points), virtual currency, cash, Bitcoins, Facebook credits, eBay bucks, cash-equivalent currency (e.g., gift cards, travelers checks, cashier's checks), and any other form of currency…"

The eBay filing further details that:

"...The currency module is configured to manage exchange of digital currency. Accordingly, the currency module allows a user to trade one form of currency for another form of currency. In one embodiment, one of the forms of currency being traded is cash. The digital currency may be used to pay for real-world financial obligations (e.g., bills) as well as for virtual-world obligations…"

"...The payment system allows users to accumulate value (e.g., in a commercial currency, such as the U.S. dollar, or a proprietary currency, such as points, miles, or other forms of currency provide by a private entity) in their accounts, and then later to redeem the accumulated value for products (e.g., goods or services) ….elsewhere on the network."

Actually, this sounds eerily similar to my first article for AuctionBytes in 2002, "Reaching eBay Global Markets with the Help of PayPal Multiple Currencies" where I explained that in November 2002, PayPal announced that its users could send and receive multiple currencies. This enable sellers to "take advantage of disparities in seller fees across international sites in an arbitrage-like situation," I wrote, and speculated on currency fluctuations. Basically, the realization of the PayPal dream.

PayPal has the ability to become a trusted Bitcoin wallet and people would be willing to pay good Bitcoin (err, money) for such a service. Basically just like you wouldn't keep your entire life savings in your everyday wallet, users of Bitcoin shouldn't keep their entire bitcoin savings online. An elegant trusted cold storage (i.e. offline) solution is needed and I hope that PayPal is chiseling away at this problem. One potential solution I recently discussed over at Let's Talk Bitcoin is Alcatel-Lucent's Vault to Wallet Transfer System.

What BitMit offered (and eBay will likely offer) is essentially "trusted" third party escrow services. The Bitcoin model offers a paradigm shift whereby trust is delegated to the Bitcoin protocol. Because Bitcoin is "programmable money" it will be (possible) https://www.bitrated.com to push escrow to the Bitcoin network. In fact even companies themselves can be outsourced to the protocol.

Bitcoin gets rid of the middleman, and I'm not sure that eBay is ready to fully embrace this concept.

In "Anatomy of an eBay Scam," I discussed how some sellers were trying to game the eBay system by pulling the old "switcheroo." With Bitcoin it is possible to prove or certify the existence of something in digital form (www.proofofexistence.com).

In this regards I will also speculate as I did in "eBay Flexes Muscle with Flexible Shipping Delivery" that eBay will attempt to acquire a major shipper such as FedEx... because aren't they just eBay's middle man? An old concept that is disintegrating.From Mish

Japan’s government said Bitcoin isn’t a currency amid calls for its regulation a week after the bankruptcy of Mt. Gox, the Tokyo-based exchange that was once the world’s biggest.

There is no law to define Bitcoin and relevant ministries are gathering information on it, Prime Minister Shinzo Abe’s cabinet said in a statement in response to questions from an opposition party lawmaker. Bitcoin transactions can be taxed, according to the statement obtained by Bloomberg News.

Japan isn’t the only country grappling with the regulation of Bitcoin amid reports of hacking into exchanges including Mt. Gox and concern that the virtual currency can be used for money laundering. In the U.S., states are wrestling with how digital-currency businesses could be regulated as money transmitters, while Russia has said Bitcoin is illegal under current law and Finland plans to treat it as a commodity.

The Japanese banking law doesn’t allow lenders to broker Bitcoin transactions or set up accounts for customers to store the digital assets, according to the statement. At the same time, current rules don’t prevent brokerages and asset managers from managing clients’ Bitcoins, it said.

“Japan’s government is falling behind the curve as Bitcoin grew rapidly over the past five years,” said Weizhou Yang, an analyst at Mizuho Securities Co. in Tokyo. “Banks shouldn’t take risks to dabble in Bitcoin business. On the other hand, getting Bitcoin into funds may broaden the investment product base.”
DPJ’s Okubo

Democratic Party of Japan lawmaker Tsutomu Okubo, a former vice finance minister, called on the government to rectify the lack of regulation last week. Officials from the Finance Ministry, Financial Services Agency and Bank of Japan have said they’re not in a position to oversee Bitcoin.

“The authorities’ stance that they don’t have responsibility is disgraceful,” Okubo, who also used to work at Morgan Stanley, said in a telephone interview on Feb. 26. “We need to establish a legal system.”

Finance Minister Taro Aso said today that the government hasn’t decided whether to regulate Bitcoin. Earlier this week Aso, who also oversees the banking regulator, said it wasn’t clear yet whether Mt. Gox’s failure was a crime.

Singapore’s finance minister said last month that the central bank didn’t recognize Bitcoin as legal tender. China has stopped financial institutions from dealing in it, even as trading continues. Danish regulators are drafting a proposal for lawmakers in an effort to protect consumers and businesses from losses.

The answer to my question is yes, no, don't know, and it depends (dependent on what country you are in).

Newsweek Unmasks Bitcoin Inventor

Two days ago, Newsweek unmasked Satoshi Nakamoto, The Face Behind Bitcoin. It's a fascinating article, and one well worth a look.

Here's a paragraph that caught my attention.

Andresen, a Silicon Valley refugee in Amherst, Mass., says he worked closely with the person "or entity" known as Satoshi Nakamoto on the development of Bitcoin from June 2010 to April 2011. This was before the rise of today's multibillion-dollar Bitcoin economy, boosted last year by the unexpected, if cautious, endorsement of outgoing Federal Reserve chair Ben Bernanke, who said virtual currencies "may hold long-term promise."

Since then, Bitcoin ATMs have been cropping up across North America (with some of the first in Vancouver, British Columbia; Boston; and Albuquerque, N.M.) while the acceptance of Bitcoin has spread to businesses as diverse as Tesla, OkCupid, Reddit, Overstock.com and Virgin Galactic, Richard Branson's aviation company, which has said it will blast people into space if they cough up enough Bitcoin.

Dorian S Nakamoto, the Japanese-American man named as bitcoin inventor Satoshi Nakamoto, has denied any link to the digital currency amid a farcical media chase through Los Angeles.

Nakamoto, 64, disputed a Newsweek cover story that on Thursday unmasked him as the “father of bitcoin”. His denial cast doubt on a putative scoop the magazine used to relaunch its print edition.

Nakamoto made the denial in an interview with the Associated Press after a day of near-slapstick scenes in which dozens of journalists pursued him and an AP reporter through the city, provoking a social media storm. “I got nothing to do with it,” he said.

A media posse continued seeking Nakamoto on Thursday night after he left the AP office in downtown LA where he and the reporter had sought refuge earlier in the day.

The Newsweek story, written by Leah McGrath Goodman, named him as “the mystery man behind the crypto-currency” which exploded in popularity in 2013 and supposedly made its founder worth $400m.

Satoshi Nakamoto, a name attributed to the currency’s founder, was widely deemed a pseudonym for an elusive, genius hacker. Numerous media organisations tried and failed to find him.

Newsweek, a venerable but struggling brand that had dropped its print edition in 2012, returned to newsstands this week trumpeting its 4,500-word story under the headline “Bitcoin’s Face”.

Within hours of publication dozens of journalists camped outside Nakamoto’s door, ringing the bell with no response, until their silver-haired, bespectacled quarry, dressed in a grey sports coat and striped shirt, emerged and said he wanted someone who spoke Japanese and would buy him lunch.

“I’m not involved in bitcoin. Wait a minute, I want my free lunch first. I’m going with this guy,” Nakamoto said, pointing at an AP reporter. “I’m not in bitcoin, I don’t know anything about it.”

Cameras followed as the pair headed in a Prius to a sushi restaurant. When reporters intruded they left and drove downtown, the pursuers tweeting all the way and making comparisons to the OJ Simpson highway chase in 1994.

The pair took refuge in the news agency’s downtown headquarters, leaving a media mob outside. In AP’s report, published late on Thursday, the alleged currency mastermind said his English was imperfect and that the Newsweek reporter misinterpreted him when he said was “no longer involved in that”.

“I’m saying I’m no longer in engineering. That’s it,” he said of the exchange. “And even if I was, when we get hired you have to sign this document, contract, saying you will not reveal anything we divulge during and after employment. So that’s what I implied. It sounded like I was involved before with bitcoin and looked like I’m not involved now. That’s not what I meant. I want to clarify that,” he said.

McGrath Goodman, who spent two months researching the story, responded that she stood by her version of the exchange on his doorstep. “There was no confusion whatsoever about the context of our conversation – and his acknowledgment of his involvement in bitcoin.”

Followup Statement

Newsweek issued a followup statement in regards to the denials ... "Newsweek stands strongly behind Ms. Goodman and her article. Ms. Goodman’s reporting was motivated by a search for the truth surrounding a major business story, absent any other agenda. The facts as reported point toward Mr. Nakamoto’s role in the founding of Bitcoin."

I believe Newsweek has it correct. Leah McGrath Goodman did a fantsatic job of investigative reporting.